Global Secondary Battery Stocks Surge... "Domestic Discount Factors Will Disappear"

[Asia Economy Reporter Oh Ju-yeon] Recently, the stock prices of global secondary battery-related companies have been showing strong performance. As domestic secondary battery companies have also entered a high-growth phase, an analysis revealed that the value of their secondary battery business divisions is discounted by 47% compared to CATL, the global leader in electric vehicle battery market share, and Tesla.

Hyundai Motor Securities recently noted the pronounced strength in the domestic and international electric vehicle and secondary battery value chains, attributing this to strong Tesla sales, expectations for new factories in China, the full-scale launch of new vehicles by major European companies, and ongoing tightening of environmental regulations. However, it explained that domestic secondary battery companies are receiving discounts compared to global players.

Researcher Kang Dong-jin stated, "At the current stock price level, LG Chem's secondary battery business is estimated to be valued at around KRW 25 trillion," adding, "Assuming net debt of KRW 10 trillion, this is reflected as about KRW 15 trillion in market capitalization."

He said, "When excluding the existing business segments and working backward, the implied EV/EBITDA multiple applied to the business value is estimated at 14.9x, which is a 47% discount compared to the 28x multiples applied to CATL and Tesla in the market."

The discount factors include that LG Chem's secondary battery business figure includes the small battery business, which has relatively lower growth potential compared to EV batteries, uncertainties in profitability due to yield issues at the Poland factory, and uncertainties related to domestic ESS accidents. However, since cylindrical battery supply to Tesla in China is planned and the Poland factory yield is expected to gradually improve, it is forecasted that the discount factors will decrease over time.

Regarding Samsung SDI, it was assessed that if the value related to Samsung Display (SDC) equity method is reflected with a 30% discount, the business value at the current stock price level is KRW 14.4 trillion. Assuming net debt of KRW 3.3 trillion, this is reflected as about KRW 11.1 trillion in market capitalization, and the implied EV/EBITDA multiple is estimated at 11.1x. This represents a 61% discount compared to CATL and Tesla.

Researcher Kang explained the discount factors as "relatively high domestic ESS uncertainties, relatively high proportion of small battery business growth slowdown, and uncertainties regarding growth prospects after 2020," emphasizing, "As guidance on post-2020 strategies becomes more concrete and domestic ESS exposure gradually decreases, the discount factors are expected to diminish."